alt midterm 1 solutions

# alt midterm 1 solutions - IE 343 Fall 2009 Name Student ID...

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Name: _______________________ Student ID: ___________________ 2 1. A computer chip manufacturing firm leases a building for \$95,000 per year to manufacture the chips. The firm also pays for the machinery in the building in installments of \$25,000 per year. Each chip costs \$20 in labor and \$15 in parts. The price of the chip in the market is \$50. a) What is the breakeven level of the firm? 5 points Total fixed cost = 95,000 + 25,000 = 120,000 Total variable cost = 20 + 15 = 35 TC = 120,000 + 35D TR = 50D Breakeven occurs at TR = TC 50D = 120,000 + 35D D = 8000 b) If the firm decides to lower the price of the chip to \$40, how many chips per year must the firm sell to earn a profit of \$50,000 per year? 6 points Find D such that = 50,000. TC remains unchanged. TR = 40D. TR – TC = 5D – 120,000 = 50,000
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## This note was uploaded on 02/07/2012 for the course IE 343 taught by Professor Vincent,g during the Spring '08 term at Purdue.

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alt midterm 1 solutions - IE 343 Fall 2009 Name Student ID...

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